Syndicate Results 2020 #43 Syndicate 1884 Charles Taylor/Premia

The Lloyd’s syndicates have now published their results and, in some cases, added detail and an outlook for 2021. As in the past three years, IMN is summarizing the results from all syndicates that have a marine interest which have provided some information on the marine side.

Run-off manager – R D Andrews.

Syndicate 1884 was launched on April 1st 2015, writing primarily marine classes. In October 2018 the CTMA Board took the decision to place the Syndicate into run-off with effect from January 1st 2019.

Following entry into run‐off the management of the Syndicate aimed to: 

  • Maintain appropriate claims and post bind underwriting service levels for policyholders
  • Seek to mitigate further deterioration of the result
  • Reduce risk (reducing on‐going capital requirements and ultimate reinsurance to close costs)
  • Target third‐party reinsurance to close at acceptable cost on closure of the 2018 YOA at December 31st 2020.

The Syndicate has said that it made good progress against each objective in 2020: 

  • Management of staffing levels and use of appropriate retention arrangements has ensured key skills have been retained. Implementation of business continuity contingency plans following the introduction of Covid pandemic related restrictions has allowed a smooth transition to remote working and ensured that policyholder service levels have been unaffected.
  • The 2018 YOA result improved by 9.3% in calendar year 2020, notwithstanding strengthening of reserves in respect of unexpired political risk policies exposed to worsening global economic conditions.
  • Reinsurance arrangements were restructured and renewed, providing a lower retention to protect the net underwriting result in 2020. The cost of additional reinsurance purchases has been within budget and within risk appetite. The Syndicate’s agreed capital requirement has reduced through the year.
  • The Board has approved closure of the 2018 YOA into the re‐constituted Syndicate 2021 YOA, giving careful consideration that an equitable outcome is achieved for both reinsured and reinsuring capital providers. This provides finality to investors on the 2018 YOA.

The 2018 YOA has been closed with a loss of £35.4m (35.4% loss on capacity).

The reinsurance to close premium of £64.4m paid to close the 2018 YOA was calculated as:

  • £58.6m in respect of best estimate net insurance liabilities
  • £5.8m additional risk premium payable to the reinsuring year of account, £4.6m of which had previously been contributed on closure of 2017 and prior years into the 2018 YOA.

The additional risk premium was set at 10% of net insurance liabilities, consistent with the risk premium charged on closure of the 2017 and 2016 and prior YOAs.

Premia Managing Agency, which manages the Syndicate, was acquired by Bermuda based legacy reinsurance group Premia Holdings Ltd, effective March 16th 2020.

In addition to the RITC of the 2018 YOA, the Syndicate also completed two additional RITC transactions. of the 2018 YOA of syndicate 1955 and the 2018 YOA of syndicate 1861. The RITCs of the 2018 YOAs of 1884, 1955 and 1861 have all been written into the 2021 YOA of Syndicate 1884.

Following closure of the 2018 YOA the Syndicate has now completed its re‐purposing to become an integral part of the Premia group writing RITC and legacy reinsurance in the Lloyd’s market, supported by fully aligned capital.

Following completion of these transactions the Syndicate began 2021 managing £657.5m of net insurance liabilities.

The Syndicate’s mix of business in 2021 is composed of marine, energy, property, D&O, financial institutions, professional indemnity and general liability business, with smaller exposures to aviation and space, political risk, consumer products and contingency business.

The primary objectives for the management of the Syndicate’s run‐off during 2021 are:

  • Complete integration of the management of liabilities assumed under third party RITCs of syndicates 1861 and 1955, with only residual transitional arrangements in place after Q1 2021.
  • Ensure continuity of claims and post‐bind underwriting service levels to policyholders is maintained throughout the lifetime of each policy in line with reasonable policyholder expectations, Lloyd’s minimum standards and other regulatory requirements.
  • Ensure run‐off management actions (such as settlement of claims, reinsurance purchase, post bind underwriting activity) enhance the financial and risk position of the syndicate. As an integral part of the Premia group, the Syndicate will seek out new opportunities to add to the portfolio of risks under management through RITC or legacy reinsurance transactions in 2021, subject to completion of thorough due diligence and pricing being sufficient to meet return on capital objectives.
Calendar Year Result £000s 2020 2019
Gross premium written 8,723 26,949
Earned premium, net of reinsurance 12,539 45,805
Loss on the technical account for the year 8,490 (22,936)
Claims ratio (15.8%) 90.4%
Acquisition ratio 14.1% 35.6%
Expense ratio 35.9% 25.0%
Combined ratio 34.2% 151.0%

The Syndicate generated £238,465 of investment income in the year 2020 (2019: £480,341).

Sectors

2020 £000s GPW GPE GCI Op exps Reins Bal Total
Direct MAT 3,994 6,078 7,918 (2,106) (2,058) 9,832
Total Direct 7,519 11,528 (521) (5,804) 197 5,400
Reinsurance 1,204 2,102 2,039 (463) (826) 2,852
Grand Total 8,723 13,630 1,518 (6,267) (629) 8,252
2019 £000s GPW GPE GCI Op exps Reins Bal Total
Direct MAT 8,541 22,486 (16,834) (11,988) (5,402) (11,738)
Total Direct 22,474 53,968 (50,809) (23,261) (107) (20,209)
Reinsurance 4,475 11,259 (6,337) (4,021) (4,108) (3,207)
Grand Total 26,949 65,227 (57,146) (27,282) (4,215) (23,416)

Emoluments

The Run‐off Manager received the following remuneration charged to the Syndicate and included within net operating expenses:

£000 2020 2019
Aggregate remuneration in respect of qualifying services 212 272

https://www.lloyds.com/about-lloyds/investor-relations/financial-performance/syndicate-reports-and-accounts/2020-1884